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Analysis of bill to eliminate Puerto Rico inventory tax begins

By on March 13, 2018

SAN JUAN — The Government Committee of Puerto Rico’s House of Representatives, in conjunction with its Treasury Committee, chaired by Reps. Jorge Navarro and Antonio Soto, respectively, began analyzing Monday a bill that would eliminate the tax on inventory, or stored goods, with the aim of achieving greater product on the island.

House Bill 1411, authored by Speaker Carlos Méndez and Navarro, intends to amend the Municipal Property Tax Act of 1991 to establish that property of a business owner that consists of for-sale merchandise be exempt from property tax.

The bill’s purpose states that business owners have warned about the tax’s negative effect on stored inventory and product reserves. It also points out Puerto Rico’s need to import consumer products, given that 80 percent of the food sold on the island is imported.

The bill also seeks to amend the Municipal Business Tax Act to increase the levy from 1.5 percent to 1.8 percent on the volume of business applicable to operations in the respective municipality, and in the case of services, the sale of assets or businesses, a tax capped at 0.5 percent to 0.8 percent of 1 percent of the business volume.

Navarro said at the beginning of the public hearing that business owners have complained that they have to pay the tax on inventory multiple times.

He then argued that “the recent natural events have shown us it is time to solve the difficulty of storing enough supplies for our families, and with the approval of this bill we would help business owners have greater inventory and in the same way, we avoid a dislocation in municipal finances.”

Reinaldo Paniagua, executive director of the Municipal Revenue Collection Center (CRIM by its Spanish acronym), said he was in total agreement with the bill’s objectives and recommended the issue should be addressed via new legislation “that amends the municipal tax law to establish that…tax on inventory is paid at the moment merchandise is sold.”

In addition, he suggested “identifying a new tax rate to compute the payment and thus comply with the departure of the central government and the participation of the State Debt Contribution [CAE by its Spanish initials) used to pay municipal loans.”

In his turn, Soto said he will do everything he can about that tax, “which is onerous,” and that his vision “has always been for the government being a facilitator of the private sector, and that wealth be created at the private sector. For that, we need to be a little detached, from a government standpoint, and cede part of what we have for it to be in the pockets of those who produce.”

Rep. José González asked CRIM’s executive director if when studying the bill they obtained data about whether the measure would affect municipalities, to which Paniagua confessed needing more time to analyze the bill and be able to deliver a detailed report.

The chairman of both committees required CRIM’s director to provide a detailed report on each municipality’s business and residential property.

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